AAI seeks price correction in REC to shun burden on Aluminium Industry

The Aluminium Association of India (AAI) seeks the Central Electricity Regulatory Commission (CERC) to at once look into the distorted market of Renewable Energy Certificates (REC) which, according to it, is stemming an artificial demand and price surge in the power exchange.

AAI vice-chairman Rahul Sharma said: “The association feels that it is apparent that the prices of Solar RECs in the last one year have shot up by more than 125% from INR 1000/MWhr to INR 2250/MWhr, putting an additional burden of INR 1.25/kwh of RE energy compliance for all consumers.”

“This huge burden on the consumers is due to non-revision of REC prices since 2017 by the regulator, despite a steep fall in RE generation costs.”

In a recent representation to the CERC, the AAI said, "There is an acute shortage of Renewable Energy Certificates in the market which has prompted the market to be a seller’s one. REC prices have spiked up in past 12 months to as high as INR 2.25 /kWh for Solar RECs while it is a known fact that Solar power itself has been getting auctioned at an average rate of INR 2.50 /kWh since FY17-18."

AAI has additionally yielded that the primary reason for illiquidity in the power exchange or REC market for failed trades is that the utilities or demand-side participants understand that the actual price of REC is much lower than the floor price allowed by the Commission and the REC prices are expected to go down in time.

The present market is confronting more than 90% deficit in the supply of REC, the representation said adding that the Revised Tariff Policy, 2016 provides discretion to the Commission to prescribe a vintage based REC multiplier to grant a higher or lower number of RECs.

Mr Sharma also said: "India has seen a steep increase in Renewable generation with installed RE capacity reaching 82,000 MW in March’20. While the RE generation capacity has grown rapidly, even more, rapid has been the pace of increase in RPO burden on the consumer. This is primarily due to the delay in much-needed price band correction which is regulated.”